A loan against property is a secured credit instrument where individuals can mortgage their immovable assets to obtain a sizable fund. Therefore, this secured loan is an affordable alternative if prospective borrowers want to finance their personal or professional financial requirements.
One can secure up to 70% of the property’s value as a loan amount. If they are applying for this credit instrument, they are also eligible for a loan against property tax benefits under specific circumstances.
What are the tax benefits of a loan against property?
Illustrated below are the details of applicable tax benefits that individuals can avail a loan against property:
- Tax deductions under Section 37(1)
Individuals can claim tax benefits under Section 37 (1) of the Income Tax Act on the interest paid, processing fees and documentation charges etc. Note that the fund obtained from a loan against property is used for business purposes and does not cover personal or capital expenditures.
- Tax benefits under Section 24(B)
Salaried individuals can claim tax benefits on the interest paid under this section. However, individuals need to utilise the borrowed fund to finance their purchase of new residential houses. Accordingly, borrowers can qualify to claim up to Rs.2 lakhs as tax deductions, given that they need to provide valid proof to verify the borrowed fund’s end-use.
Circumstances under which individuals cannot claim tax benefits
- If individuals utilise the sanctioned fund for personal purposes such as marriage, education, medical emergencies etc., they cannot avail of a loan against property tax benefits.
- Individuals cannot enjoy tax benefits on loans against property under Section 80C.
Moreover, one should note that borrowers cannot claim tax benefits on the repaid principal of a loan against property, unlike home loans.
Knowing about the tax benefits are essential to maximising savings. Individuals can also consider the following additional ways to save on a loan against property interest rates:
- Choose the tenor wisely
A longer repayment tenor implies an affordable monthly instalment, unlike a shorter loan repayment window. However, a longer repayment tenor comes with a drawback of higher interest outgo in the long run. The shorter repayment tenor may require individuals to spend higher on EMIs, but they may save on the total interest payable in the long run. It is ideal to contact trusted financial institutions before reaching a final decision regarding loan repayment tenor.
- Compare between lenders and check the charges
Individuals should invest the time researching and comparing between the multiple lenders available in the market and the charges they levy for processing the loan application. They should also make sure to communicate with a lending institution about its terms and conditions to make an informed decision and avoid inconvenience later.
Besides, individuals must also check the disbursement time before apply for loan against property.
Several leading financial institutions offer quick disbursal of a sizable fund under this credit instrument against meeting a loan against property eligibility criteria and submitting minimal documents.
Moreover, these financial institutions also extend pre-approved offers to their existing customers. These pre-approved offers are available on home loans, loans against property etc. Willing individuals can check their pre-approved offer by submitting their names and contact details.
Thus, individuals can meet the eligibility parameters and apply for a loan against property to finance big-ticket expenses without any hassles.
How to apply for a loan against property online?
Follow the few simple steps mentioned below to apply for a loan against property online –
Step 1: Visit the financial institution’s official website and select the online application page.
Step 2: Enter personal details such as name, contact details etc. and income-related information to select the best possible loan deals based on the financial profile. Then, submit the application form to complete the process.
A representative will contact the applicant to guide him to the following procedures. Submit the necessary documents and cooperate with the representative for property and identity verification.
Read Also: Know How a Home Loan Calculator Makes Loan Planning Easier for You
Thus, keep the pointers in mind mentioned above to avail of a loan against property tax benefits with ease. Additionally, keep the documents ready beforehand to avoid inconvenience when applying for this loan.
